The Mortgage Bankers Association (MBA) said this morning that mortgage application activity dropped sharply during the week ended October 19.  The MBA's Market Composite Index, a measure of mortgage loan application volume, fell 12.0 percent on a seasonally adjusted basis and 2 percent on an unadjusted basis from the week ended October 12.  MBA pointed out that the previous week's seasonally adjusted number had also been tweaked higher to account for the Columbus Day holiday.

The Refinancing Index was down 13 percent to its lowest level since late August and the seasonally adjusted Purchase Index decreased 8 percent.  On an unadjusted basis the purchase index was up 2 percent week-over-week and was 7 percent higher than during the same week in 2011.  Refinancing accounted for 81 percent of all mortgage applications compared to 82 percent a week earlier.  

Purchase Index vs 30 Yr Fixed

Refinance Index vs 30 Yr Fixed

Mortgage rates increased across the board with both contract and effective rates higher than the previous week.  The contract rate for 30-year fixed-rate mortgages (FRM) with conforming balances ($417,500 or more) increased for the third straight week to 3.63 percent with 0.45 point.  The rate the previous week was 3.57 percent with 0.44 point.

The contract rate for 30-year FRM with jumbo balances (over $417,500) rose to 3.85 percent from 3.81 percent with points unchanged at 0.42.  FHA-backed 30-year FRM increased to 3.41 percent with 0.51 point from 3.34 percent with 0.82 point.  The rate for 15-year FRM jumped 9 basis points to 2.96 percent with points decreasing to 0.36 from 0.39.

Adjustable rate mortgages (ARMs) accounted for 4 percent of applications, a slight increase from the previous week.  The average rate for 5/1 ARMS increased to 2.72 percent with 0.33 point from 2.59 percent with 0.35 point.

All interest rates quoted are for loans with 80 percent loan-to-value ratios and points include the application fee.

MBA's Weekly Mortgage Application Survey from which the volume indices are derived has been conducted since 1990 and covers over 75 percent of all U.S. retail residential mortgage applications.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for the indices is March 16, 1990=100.